Almost half of Lifetime ISA holders took up this product to save for his or her first house, knowledge from HMRC reveals.
The survey finds that 46% of prospects opened their accounts to buy a first house, whereas 45% did so to save for retirement or later life.
LISAs, launched in 2017, permits individuals underneath 40 to open a LISA and put in up to £4,000 every year till they’re 50. At the tip of every tax yr, that is topped up by a 25% bonus from HMRC. It has a £450,000 threshold cap on home purchases.
The scheme additionally permits prospects to save for his or her retirement.
The examine comes after a important report by the Treasury Committee in June, which mentioned that the twin goal of the product makes it “extra probably customers will select unsuitable funding methods”.
The authorities has additionally mentioned it’s “ choices for reforms” when it comes to ISAs to encourage investing cash, with modifications anticipated within the November Budget.
The HMRC survey discovered that 90% of LISA holders mentioned the federal government bonus was a ‘essential’ issue that led them to open the account.
LISAs have attracted widespread criticism as a result of it carries a 25% early withdrawal cost if prospects take out money with out shopping for a house, which successfully acts as a 6.25% exit penalty on their financial savings.
The examine, which was performed in January and launched this week, finds that 11% of LISA holders had made unauthorised withdrawals by the point of the analysis.
This consists of 3% who made an unauthorised withdrawal to buy a property outdoors of the LISA guidelines, and eight% who made an unauthorised withdrawal for an additional motive.
Reynolds mentioned: “We can’t have a risk-free possibility of investing for the long-term. We wouldn’t have that state of affairs.”
Around £213m has been paid in withdrawal fees from 286,000 individuals within the six tax years to April 2024, in accordance to the Treasury Committee.
MPS add that since 2018–19, LISAs have been used to buy 182,500 houses.
The common withdrawal from LISAs to buy a house in tax yr 2023–24 was £15,000.
Since 2017, 6% of adults who’ve ever been eligible have opened a LISA, with round 1.3 million accounts nonetheless open.
